Businesses and consumers affected by the COVID-19 pandemic will benefit from the latest interest rate cut. Regional Director at FNB South Africa, Andiswa Bata, says that the 50 basis points cut is helpful as it puts more cash back into businesses.

The Reserve Bank’s Monetary Policy Committee’s announcement on Thursday takes the current repo rate to 3.7%. The prime rate moves to 7.2%.

Banks say the latest cut will provide relief to businesses and consumers who can still afford to pay their debts.

The cut brings the total reduction in lending rates to 275 basis points this year so far.

Bata says, “One can ask what does this mean for small business, where a business has a bank loan, the monthly repayment will now be lower. A cut is helpful, it puts more cash back in the business which can be redirected to landlords or boost cash buffers as it seeks to ride the next few months.”

“The 50 basis points is a measure that can be good for consumers, but you will have expected them to cut the repo rate by 100 basis points. That would have created more ease for the consumers, whether it would be businesses or individuals because the economy is deeply affected. When at the same time you look at inflation, you can realise that it is at 4.1% and looking at the target of 3.5%, it really needs again 100 basis points.”

He says that consumers will feel the 50 basis points difference in the repayment of loans and bonds.

Mkhabela says, “Consumers will start to see on their bonds or their loans and vehicle finances … they will see a difference in their repayment models and at the same time, we will look at a better relief in terms of income. So, if you were paying a higher bond, you will start to have some figures that will be part of your possible income.”

This entry was posted on 22 May 2020,08:40AM at 8:40 AM and is filed under Coronavirus, Business.
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